August 5, 2022
Why you Shouldn’t Trust 3rd-Party Consumer Data
By Alex Cramer
Would you pay full price for a car that didn’t have wheels? Or would you go over-asking for a house that had no roof and a family of badgers living in the master bedroom? But would you…ok, I’m sure you have the idea by now.
We’re talking about paying way too much money for things that have far too little value, and while you may be shaking your head as you read this and thinking ‘what kind of idiot would spend money on any of those things?’, if you run an e-commerce business that pays big money for third-party consumer data, then its entirely possible that the answer to that question is you.
A study by the Harvard Business Review shows that companies spent over $200 billion dollars on targeted 3rd party consumer data. And on the surface, that makes sense.
If you’re selling cute dresses, you probably want to make sure that your ads are targeted at an audience of “Fashion-interested women who are 21 to 34 years old” Likewise, if your brand offers limited edition sports jerseys you want to make sure that you are targeting “sports-interested men who are 18 to 36 years old”.
That’s marketing 101 and it’s why companies spend so much money on data.
But what if it’s all wrong? Not the idea of targeted marketing itself, but the data used in these campaigns. Most data brokers keep how they collect their data secret. Sure, we know the general sources they go to get their info, but they don’t actually share how they create those highly coveted consumer profiles that every brand is so eager to write big checks for.
That’s why the HBR decided to actually put these brokers to the test and check to see if based on their own research, they could verify that the customer profiles they were buying accurately described the targeted individuals.
The short answer is: no they did not.
The study shows that the quality of data purchased from 3rd party brokers varies wildly and that it’s possible to pay large sums of money for totally inaccurate information and that in some cases the demographic data was so faulty that you would be better off creating a random list of targeted consumers.
The study found that on average, brokers correctly identified the gender of men only 42% of the time, which is lower than the 50% rate you could achieve with random guessing. The same is true of age, with broker data being found to have missed the correct age tier in 77% of cases. And this data will likely only become more inaccurate as Google and Apple crackdown on how companies are able to track internet users and gather their information.
Hard to have a targeted marketing strategy if you’re data brokers are selling you the wrong targets.
If you’ve spent any time working in e-commerce (or reading this blog) then you know that data is everything for a brand and it’s impossible for your business to thrive if you don’t know how to who your customers are or where to find them.
So if third-party data can’t be trusted how do you find the customers that your brand is after?
If you want to build a targeted marketing campaign then you need a strategy to collect first-party data which is exactly what affiliate marketing is designed to do.
A well-run affiliate network should be delivering two things that your company needs to thrive: sales and data on your customers (not so fun fact: when you sell on Amazon’s marketplace, they take their commission and keep your customer data for themselves).
Your affiliates should be funneling customers and prospects into your website where they will deliver their information directly to you. First-party data is higher quality, easier to verify, cheaper to acquire and perhaps most importantly is exclusive to you.
As e-commerce competition heats up, customer acquisition costs are only going higher, which means that the pressures to form a direct connection with your customers are increasing.
And while we understand the temptation to just write a check to a data firm with a big reputation, the Harvard Business Review study shows that while you might think you’re paying for prime rib, most of these companies are just selling you baloney.
Ultimately, no information will ever be more accurate than what you can collect yourself. That means that having a high-quality first-person data collection strategy isn’t a luxury, it’s a requirement and a well-run affiliate campaign can get you there.
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